Question-and-Answer Session
Operator
(Operator Instructions). Our first question will come from the line of Bill Apasellie (sp) with City Investment Research. Please proceed.
Greg Gordon – City Investment Research
Good morning. Hi. It’s actually Greg Gordon. How are you? One technical question. Can you state the amount of the auction-based debt? And then tell us what the delta was on the underlying rate versus the default rate?
Mark A. Ruelle
We have about $272 million of that debt, Greg, and I think before any of the issues it was trading, in what range, guys? Yeah, kind of 3.5% and our worst penalty rate’s been 5.5%.
Tony Somma
It’s a multiple of the index when the auction sales.
Greg Gordon – City Investment Research
Now, if you were to term that out, that would get into the rate case as an underlying change in your profit capital? Is that the right way to think about it?
Mark A. Ruelle
That’s certainly how we’re thinking about it.
Greg Gordon – City Investment Research
Okay. Second, on the equity, obviously the stock’s traded down (inaudible) performance slightly better than the rest of the utility. Would you change course and consider shelving and issuing on convert instead of straight common in order to get some equity treatment and lower your cost of equity before the case? And then as a follow-on question, if you were going to just try to hold back and wait for better market conditions, how long after the filing of a case that you file would you issue and you can expect to get a pro forma adjustment in to the rate case?
Mark A. Ruelle
It’s kind of parsed fairly slim. Or fairly detailed. Let me take a stab at it Greg. One is, you know our target capital equity capitalization is roughly 50-50 and ideally that’s where you get when you set rates. That’s the target and that’s the way we want to finance. We of course don’t have to issue any equity because we’re already fairly close to the target (inaudible) as we continue to invest if we don’t supplement it with additional equity we’ll get further away from our targets. So opportunistic in the approach, which is if the markets are there for us we intend to stay pretty close to that 50-50. If the markets trade away from us and we just don’t perceive adequate value there we don’t have to issue additional.
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